Innovation has been the driving force of change in the energy industry in recent years. While the demand for change is strong, the challenge of paying for new energy technology remains formidable.
In the spirit of change, financing mechanisms have been equally innovative, helping utilities, building owners and consumers invest in technologies such as photovoltaics, wind power and electric cars, despite the upfront costs.
One of those innovative financing mechanisms, energy efficiency as a service (EEaaS), is helping building owners invest in new technology to reduce energy use. Typically, a building owner enters into an agreement with a provider that pays for energy efficiency retrofits to the building. The building owner does not pay any upfront costs for the improvements. Instead, payments are made in installments over a defined period of time. Payments are covered by the savings in energy costs realized from the improvements.
The U.S. Department of Energy’s Better Buildings Initiative says EEaaS is gaining popularity because “it overcomes market barriers that other mechanisms do not.”
The Better Buildings Initiative highlights a number of success stories, including a partnership between telecom giant AT&T, Dallas and EEaaS provider Redaptive, San Francisco, which has resulted in $20 million in aggregated annual energy savings.
While the concept is not new, it is increasing in popularity and use as the energy efficiency field continues to grow.
According to SmartCitiesDive, cities have led in this space for many years. In January, Seattle City Light, the city of Seattle’s publicly owned utility, launched an EEaaS program for its customers. The financial benefits of electricity savings are paid back to building owners through a power purchase agreement with the utility.
Private companies are now following the trend of cutting emissions and are seeing greater opportunities. Motley Fool, identified three household names, Johnson Controls, Milwaukee; General Electric, Boston; and the commercial real estate company CBRE, Los Angeles. Each of these three companies have recently invested in smaller businesses that specialize as EEaaS providers.
All of these developments point to an upward trend. Technology markets analyst, Guidehouse Insights, projects that the market for EEaaS is “growing exponentially” in the United States. It predicts the market value will reach $278 billion by 2028.